Emerging Markets Key to Santander's Sustained Growth

Head of Corporate Banking Edvaldo Morata Talks to PMD Students in New York

The rise of Santander from "the equivalent of a mid-sized Massachusetts bank" can be accredited to the development of a "business model resilient to change and challenges," said IESE alumnus Edvaldo Morata, chief of staff and head of corporate banking at Sovereign Bank, a subsidiary of Santander.

Morata's remarks came during a recent presentation he gave to participants in IESE's Program for Management Development (PMD) at IESE's New York Center. Drawing on his varied experience in the banking industry (he previously worked for ING and CITI), Morata discussed key strategies that have allowed Santander to grow from a midsized Spanish Bank to one of the world's largest financial institutions.

Defining itself as a specialized global retail bank with selected (and focused) markets, Santander has used its strong corporate identity to become the number one retail bank in key emerging markets, such as Latin America, and in developed markets such as Germany.

The duality of Santander's investments allowed Santander to successfully weather the recent economic crisis. As developed markets deleveraged, delinquency rates swelled and regulatory restraints increased, Santander focused on leveraging and growing its operations in emerging markets. Currently Santander is the number three retail bank in Brazil and Mexico, as well as being number one in all of Latin America.

At a time when the BRIC countries are predicted to contribute over 60 percent of world growth by 2014, Santander has created an enviable position for itself. Not to say that Santander's position within developed markets is any less desirable. With well-controlled costs and a low-risk profile, Santander has been able to remain competitive and offset some of the margin pressure faced by the entire industry, he said.

Some of Santander's success can also be attributed to its efficiency-orientated business identity. More than a decade before the economic crisis, Santander initiated a program of technological standardization among all its branches. This, coupled with Santander's defined corporate standard of operations, has allowed Santander's individual branches to compete with the market leaders in their respective regions.

A critical strength of Santander is its ability to streamline its acquisitions. For instance, when Santander acquired ABN the deal required the acquisition of its Italian subsidiary, Banca Antonveneta, for 6 billion euros. As Italy was not one of Santander's target markets, it sold Banca Antonveneta for over 9 billion euros a few months later. While all such divestments may not end so successfully, Santander considers its commitment to focused global retail banking a key selling point to customers.